PAS 1:

PRESENTATION OF
FINANCIAL STATEMENTS
 INTRODUCTION
PAS 1 prescribes the following:
basis for the presentation of general purpose
financial statements
guidelines for structure
minimum requirements for content
ensures comparability
 GENERAL PURPOSE FINANCIAL STATEMENTS

Those intended to serve users who do not have the authority to

demand financial reports tailored for their own needs.

Complete set of financial statements:

Statement of financial position
Statement of comprehensive income
Statement of changes in equity
Statement of cash flows
Notes
Additional statement of financial position*
 General Features: Frequency of reporting:
1. Fair Presentation and
compliance with PFRS
2. Going Concern Financial Statements
3. Accrual basis of Accounting shall be presented at
4. Materiality and Aggregation
least annually.
5. Offsetting
6. Frequency of reporting
7. Comparative Information
8. Consistency of presentation
 STATEMENT OF FINANCIAL POSITION
It shows the entity's financial conditions (i.e., status of
assets, liabilities, and equities) as at a certain date. It
may be presented through the following:
a. classified manner
b. unclassified manner
c. mixed presentation
 ASSET

CURRENT ASSETS

realize the asset or intends to sell or consume it, in its normal operating
cycle;
for the purpose of trading;
realize the asset within 12 months after the reporting; or
The asset is cash or a cash equivalent unless the asset is restricted from
being exchanged or used to settle a liability for at least twelve months
after the reporting period.
As a minimum, the line items under current assets
are:
Cash and Cash equivalents
Financial assets at fair value
Trade and other receivables
Inventories
Prepaid Expenses

As a minimum, the line items under noncurrent assets

are:
Property, Plant and Equipment
Long-term investments
Intangible assets
Deferred tax assets
Other noncurrent assets
 LIABILITIES

CURRENT LIABILITIES

settle the liability in its normal operating cycle;

primarily for the purpose of trading;
to be settled within twelve months after the reporting period; or
The entity does not have an unconditional right to defer the settlement of
the liability for at least twelve months after the reporting period.
As a minimum, the line items under current liabilities are:

Trade and other payables

Current provisions
Short-term borrowings
Current portion of a long-term debt
Current tax liability

As a minimum, the line items under noncurrent liabilites are:

Non current portion of long-term debt

Finance lease liability
Deferred tax liability
Long-term obligations to company officers
Long-term deferred revenue


Discretion to refinance

Covenants

Effect of breach of
covenants
 EQUITY

Terms Used:

Owner’s Equity - proprietorship

Partner’s Equity - partnership
Stockholders Equity or Shareholders Equity - corporation
forms of statements

a. Report form
b. Account form
 Line Items of Financial Position:
1. Cash and Cash equivalents
2. Financial Assets (other than 1, 3, and 6)
3. Trade and other receivables
4. Inventories 10. Total Assets classified as held for sale
5. PPE 11. Trade and other payables
6. Investment in Associates accounted for 12. Current Tax Assets and Liability
by equity method 13. Deferred tax assets and liability
7. Intangible assets 14. Provisions
8. Investment Property 15. Financial Liabilities (other than 11 and 14)
9. Biological Assets 16. Liabilities included in disposal group as
held for sale
17. Noncontrolling Interest
18. Share capital and Reserves
notes to financial statements

provide narrative description or disaggregation of

items presented in the Financial Statements
 LINE ITEMS
a. Property, plant and equipment; i. Cash and cash equivalents;
b. Investment property; j. Assets (or disposal groups) classified

c. Intangible assets; as held for sale in accordance

d. Financial assets (excluding k. Trade and other payables;
amounts shown under (e), (h) and l. Provisions;
(i); m. Financial liabilities (excluding

e. Investments accounted for amounts shown under (k) and (l);

using the equity method n. Liabilities and assets for current tax,

f. Biological assets; as defined in PAS 12 Income Taxes;

g. Inventories; o. Deferred tax liabilities and deferred

h. Trade and other receivables; tax assets, as defined in PAS 12

 Income statement
In PAS 1 (Philippines Accounting Standard 1), the income statement, also known
as the statement of profit or loss and other comprehensive income, presents an
entity's revenue, expenses, and net income for a specific period.

The income statement typically includes the following components:

Revenue
Other income and expenses
Cost of Sales
Income before tax
Gross Profit
Income tax expenses
Operating Expenses
Net income (profit or loss)
Operating Income
 STATEMENT OF COMPREHENSIVE INCOME

The comprehensive income statement includes both the income

statement and the statement of comprehensive income. The income
statement presents the entity's revenue, expenses, and net income
for the period. The statement of comprehensive income presents
the other changes in equity that are not included in the income
statement, such as foreign currency translation gains and losses,
and gains and losses from available-for-sale financial assets.
 Components of the statement
of comprehensive income:

Net Income

Other Comprehensive Income

Total Comprehensive Income

 A. PROFIT OR LOSS

The total income less expenses, excluding the components

of other comprehensive income. This is commonly referred
to as "net income" or "earnings."
 other comprehensive income
It comprises items of income and expense (including
reclassification adjustments) that are not recognized in profit or
loss as required or permitted by other PFRS. This may be
presented either (a) net of tax or (b) gross of tax.

reclassification adjustments
Reclassification adjustments are amounts reclassified to profit
or loss in the current period that were recognized in other
comprehensive income in the current or previous periods,
 COMPONENTS OF OTHER COMPREHENSIVE INCOME

Foreign Currency Translation Gains and Losses

Gains and Losses from Available-for-Sale Financial Assets

Revaluation Surplus

Defined Benefit Pension Plan

Share of Other Comprehensive Income of Associates

Income Tax relating to components of other comprehensive income

 PRESENTATION OF OTHER COMPREHENSIVE INCOME

Two Statements Comprehensive Income

a. An income statement showing the components of profit or loss.

b. A statement of comprehensive income beginning with profit or loss as shown in the

income statement plus or minus the components of other comprehensive income

Single Statement Comprehensive Income

This is the combined statement showing the components of profit or loss and
components of other comprehensive income in a single statement
 SOURCES OF INCOME

Sales of merchandise to customers

Rendering of services
Use of entity resources
Disposal of resources other than products
 COMPONENTS OF EXPENSE

Cost of Sales

Selling, General and Administrative Expenses

Finance Costs

Income Tax Expense

Losses from Discontinued Operations

Impairment Losses

Others like: Depreciation, Amortization, and Provisions for contingencies etc.

COST OF GOODS SOLD OF MERCHANDISING CONCERN
COST OF GOODS SOLD OF MANUFACTURING CONCERN
total comprehensive income

It is the change in equity during a

period resulting from transactions,
other than those changes resulting
from transactions with owners in ther
capacity as owners.
 The following items shall be disclosed on the face of the
income statement and statement of comprehensive income:

profit or loss for the period attributable to noncontrolling

interest and owners of the parent
total comprehensive income for the period attributable to
noncontrolling interest and owners of the parent.
 NO MORE EXTRAORDINARY ITEMS

PAS 1, paragraph 87, specifically mandates that:

An entity shall not present any items of income and

expense as extraordinary either on the face of the
income statement or statement of comprehensive
income or in the notes.
 statement of profit or
loss and other
PROFIT OR LOSS comprehensive income
income less expenses, excluding
the components of other
Income and expenses for the period
comprehensive income
excess = profit; deficiency = loss may be presented in either:
computed through "transaction a. single statement
approach" b. two statements

EXPENSES PAS 1 requires an entity to present

components include cost of goods information on:
sold or cost of sales, distribution 1. profit or loss
costs or selling expenses, 2. other comprehensive income;
administrative expenses, other 3. comprehensive income
expenses, and income tax expense
 FORMS OF STATEMENTS
PAS 1, paragraph 99, provides that an entity shall

present an analysis of expenses using a classification

based on either the function or their nature, whichever

provides information that is reliable and more relevant.

However, PAS 1 does not prescribe the order or format

in which an entity presents items.

 FUNCTIONAL PRESENTATION
Also known as the cost of goods sold method, it clarifies
expenses according to their function as part of cost of goods
sold, distribution costs, administrative expenses, and other
expenses.

NATURAL PRESENTATION
Also referred to as the nature of expense method, expenses
are aggregated according to their nature and not allocated
among the various functions within the entity. In other words,
expenses are no longer classified accordingly.
 statement of changes in equity
It shows the following information:
effects of change in accounting policy (retrospective application) or
correction of prior period error (retrospective restatement)
total comprehensive income for the period
a reconciliation between the carrying amount at the beginning and
end of the period, showing seporately changes

*Non-owner changes in equity are presented in the statement of

comprehensive income while owner changes are presented in the
statement of changes in equity.
ICEBREAKER
 PAS 7:
STATEMENT OF
CASH FLOWS
CASH AND CASH
EQUIVALENTS
 Cash includes “money and any other negotiable instrument that is
payable in money and acceptable by the bank for deposit and
immediate credit.

Cash Items include in 'Cash": Cash on hand, Cash fund set and Cash in
bank

"CASH EQUIVALENTS" ARE SHORT

TERM HIGHLY LIQUID INVESTMENTS
THAT ARE READILY CONVERTIBLE TO
KNOWN AMOUNT OF CASH AND WHICH
ARE SUBJECT TO AN INSIGNIFICANT
RISK OF CHANGE IN VALUE.


examples of cash equivalent are

· 3 month BSP treasury bill

· three-year BSP treasury bill purchased three

months before date of maturity

· 3 month time deposit

· three month money market instrumental

commercial paper

 Learning objectives:

-DESCRIBE THE STATEMENT OF

-Differentiate between the 3
CASH FLOWS Activities

-State the classifications of the ff.

in a statement of cash flows
dividends received
dividends paid
-Interest Paid
interest received

Back to Agenda
 01 ACTIVITIES

Include transactions that enter into the determination of profit or

Operating
loss. These transactions normally affect income statement
activities
accounts.

Investing Include transactions that affect long-term assets and other non-
activities operating assets.

Financing Include transactions that affect equity and non-operating

activities liabilities.
02 Examples of cash flows
from operating activities

A. Cash receipts from the sale of goods, rendering of services,

a
or other forms of income

b b. cash payments for purchases of goods and services

c. cash payments for operating expenses, such as employee

c benefits, insurance, and the like, and payments or refunds of
income taxes

d. cash receipts and payments from contracts held for

d
dealing or trading purposes
EXAMPLES OF CASH FLOWS FROM
INVESTING ACTIVITIES
A. CASH RECEIPTS AND CASH PAYMENTS IN THE ACQUISITION AND

DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT, INVESTMENT

PROPERTY, INTANGIBLE ASSETS AND OTHER NONCURRENT ASSETS

B. CASH RECEIPTS AND CASH PAYMENTS IN THE ACQUISITION AND SALE

OF EQUITY OR DEBT INSTRUMENTS OF OTHER ENTITIES ( OTHER THAN
THOSE THAT ARE CLASSIFIED AS CASH EQUIVALENTS OR HELD FOR
TRADING)

C. CASH RECEIPTS AND CASH PAYMENTS ON DERIVATIVE ASSETS AND

LIABILITIES (OTHER THAN THOSE THAT ARE HELD FOR TRADING OR
CLASSIFIED AS FINANCING ACTIVITIES)

D. LOANS TO OTHER PARTIES AND COLLECTIONS THEREOF ( OTHER THAN

LOANS MADE BY A FINANCIAL INSTITUTION )
 core principle
When preparing statement of cash flows:

Include Exclude
TR ANSACTI ON S TH AT H A V E NO T
ONL Y THE T RAN S AC TI O NS
THAT HAVE AFFE C TE D
AFF ECTED CAS H AN D CA S H
CAS H AND CAS H EQUI VALENTS ( E . G . , PURCHA S E
EQUI VALENTS . ( E . G . , OF ASSETS B Y I S S UI N G NO TE
PUR CHASE OF AS S E TS B Y PAYABLE OR S H ARE S O F
PAYI N G CAS H ) S TOCKS)
 EXAMPLES OF CASH FLOWS FROM
FINANCING ACTIVITIES

A. CASH RECE I PTS FROM I S S UI NG S HA RES O R O TH ER EQ U I TY

I NS TRUMEN TS AN D C ASH P A Y M ENTS TO REDEEM TH EM

B. CASH RECE I PTS FROM I S S UI NG NO TES , LO A N S, BO N D S AN D

MOR TGAGE PAYABL E AND O THER S HO RT-TERM O R L O N G-TER M
BOR ROWI NG S , AN D THEI R REP A Y M ENTS

C. CASH PAY ME N TS BY A LES S EE FO R THE RED U CTI O N O F TH E

OUT STANDI N G L I ABI L I T Y RELA TI NG TO A LEA SE.
Remember the
ff:
OPERATI NG AC TI VI TI E S

- af f ect prof i t or l os s

I NVESTI NG AC TI VI TI E S
- - af f ect non- c urren t a s set s a n d ot h er
i nv estments

FI N ANCI NG AC TI VI TI E S
- - - af f ect bor rowi n g s a n d eq ui t y


INTERESTS AND
DIVIDENDS
 REPORTING CASH FLOWSACTIVITIES
FROM OPERATING
DIRECT METHOD

INDIRECT METHOD
-Shows each major class of -profit or loss is adjusted is
gross cash receipts and gross adjusted for the effects of non-cash
cash payments: or items and changes in operating
assets and liabilities.
 Noncash
transactions
Pas 7, paragraph 43, provides that
investing and financing transactions that
do not require use of cash or cash
equivalents shall be excluded from the
statement of cash flows.

Noncash investigating and financing

transactions shall be disclosed
elsewhere in the financial statements.
 Interest
Pas 7, paragraph 33, provides that
interest paid and interest received shall
be classified as operating cash flows
Interest paid because such items enter into the
determination of net income or loss.
-Financing cash flow

Interest received
-Operating cash flow
 Dividends
Pas 7, paragraph 33, provides that dividend received shall
be classified as operating cash flow because it enters into
the determination of net income.
Pas 7, paragraph 44, provides that dividend paid shall be
classified as financing cash flow because it is a cost of
obtaining financial resources.

Dividend Paid Dividend Received

Operating Cash Flow Investing Cash Flow

 Income tax
Pas 7, paragraph 35, provides that cash flows arising from
income taxes shall be separately discloses as cash flows from
operating activities unless they can be specifically identified
with investing and financing activities.

Tax cash flows are often difficult to match to the

originating underlying transactions, so must of the
time all tax flows are classifies as arising from
operating activities.
More applicable in profit-oriented entities.
Comply explicit and unreserved financial information with PFRS.
Do not require order or format in SFP (2 Types of presentation can
be used).
Allowed “mixed presentation” for diverse operation for SFP.
Presenting only the income statement is prohibited.
Allows the disclosure of dividends and the related amount per
sharein the statement of changes in equity or in notes.